The water and power rate ordinances were approved on March 15, 2016 and went into effect April 15, 2016. Additional rate adjustments will be effective on July 1, 2016, July 1, 2017, July 1, 2018, and July 1, 2019.

LADWP rates are charged according to how much customers use, so the less water and electricity used, the greater the savings. LADWP has a wide variety of rebates and programs to help reduce customers’ water and energy use. Visit How to Save or www.ladwp.com/rebatesandprograms to learn about LADWP’s energy efficiency and water conservation programs that can help you save on your electric and water bill.

The changes will vary depending on how much water and electricity is used. A typical single-family residential customer will see an average increase of about 3%, or $4.20 per month, for water and power on their bill each year from 2016 through 2020. Typical usage for a single-family residential customer averages 12 hundred-cubic-feet (HCF) water and 500 kilowatt-hours (kWh) of power.

Customers using low amounts of water and power will have a combined water and power bill increase of 2.4%, or about $1.91 per month, annually for five years. High-use customers will see a combined water and power bill increase of 5.3% on average per year, or about $16.31 per month. About 10% of residential customers fall in the highest tiers of water and power consumption, averaging 27 HCF of water and 900 kWh per month.

Typical residential customer (using 500 kilowatt-hours, or kWh, per month) will see an average increase of $1.17 on their monthly bill, or 1.56% per year. For low electric use customers (250 kWh), their monthly costs will increase an average of $0.84, or 2.2%, annually. Higher use customers (900 kWh) will see increases averaging $5.26, or 3.4% on their monthly bill each year. For all LADWP customers, including residential, commercial, industrial and governmental customers, the proposed rate change represents an average annual increase of 3.86% over the five years

While there are no changes to the existing tiered structure for usage and geographic location during the peak season, June through September, LADWP is proposing several other changes including:

Infrastructure Adjustment: Much of LADWP’s power grid was built in the 1940s –1960s. Over 45% of LADWP’s 321,000 poles are 60-plus years or older and more than that will need replacing in the next five years. The infrastructure pass-through factor will support the cost of upgrading and replacing these poles and other critical infrastructure that is aging. To protect customer costs, this factor includes an annual cap and only collects for expenses that have been incurred.

Base Rate Revenue Target (BRRTP):The BRRT uses a standard industry practice called decoupling to encourage conservation while covering LADWP’s fixed costs of providing reliable water and electricity service. Revenues above the sales target will be returned to customers while revenues below the sales target are recovered through charges over the next calendar year.

Power Access Charge: Previously, LADWP had no service charge (a fixed monthly charge) for residential customers. The 2016-2020 rates include a graduated, consumption-based service charge. The charge is designed with three tiers of usage—Tier 1 being the lowest. The goal is to ensure that all customers contribute to the fixed costs of operating the power system in proportion to the amount of power they use.

Rebalancing: In developing the proposed rates ordinance, LADWP has “rebalanced” the rates to be equitable among customer sectors, based on a 2014 Cost of Service Study.

The PAC is a new monthly fixed charge that will help to recover the basic infrastructure cost for providing access to the power grid. The charge is tied to a customer’s electricity consumption and varies according to three usage tiers that increase in price at each tier level. It also factors in the geographic temperature zone (cool or warm) where a customer lives. The PAC will be calculated for 2016 based on April 15, 2015 through April 15, 2016, and then every October 1st based on highest monthly amount delivered to the customer for the past year. Since the PAC is tied to consumption, customers can lower their charge each year by reducing their electric use.

The power rate ordinance continues LADWP's conservation-enhancing rate structure using three tiers, which establish blocks for energy consumption at three price levels. The tiered rate structure encourages residential customers with high energy use to reduce consumption during hot (peak) periods from June through September. The zones refer to geographic regions of the city (hot and cool).

From 2016 through 2020, a typical residential customer (using an average of 12 HCF, or hundred cubic feet, per month) will see an average increase of just over $3 on their monthly bill, or 4.76% per year. For customers using less water (8 HCF), their monthly cost will increase by $1.07, or 2.6% per year. For high water users (27 HCF), monthly costs will go up $11.05, or 7.2%, on average each year. For all LADWP customers, including residential, commercial, industrial and governmental customers, the water rate change represents an average annual increase of 5.26% over the rate adjustment period.

Additionally, during the first two billing cycles of the rate change, water rates will be slightly higher than average because of the higher cost of purchased water based an extremely low snowpack in 2015. The higher rates reflect the fact that LADWP had to purchase significantly more, higher priced water from the Metropolitan Water District during fiscal year 2015-16 due to the drought. The water cost is expected to be adjusted again on July 1, 2016 to reflect somewhat lower cost of purchased water based on this year’s moderately improved snow levels. This will be reflected on customers’ bills beginning July 1.

Expanding Tiers from 2 to 4Under the new water rates, LADWP's tiered rate structure has been expanded from two to four for single-family residential customers. The expanded tiers reflect the increasing cost of supplying more water to customers who use higher amounts of water. The tiered rates allow LADWP to recover the costs of providing water to high users while also encouraging customers to conserve. Over half of all water customers will fall under the "basic use" Tier 1 rate.

Infrastructure Reliability: LADWP must accelerate and expand its infrastructure reliability program. This pass-through factor would cover the cost of increasing mainline repairs and replacements, trunk line improvements, and other critical infrastructure reliability efforts. To protect customers, this factor includes an annual cap and only collects for expenses that have been incurred.

Base Rate Revenue Target (BRRTP): The BRRT uses a standard industry practice called decoupling to encourage conservation while covering LADWP’s fixed costs of providing reliable water and electricity service. Revenues above the sales target will be returned to customers while revenues below the sales target are recovered through charges over the next calendar year.

Securitization: Under AB 850, LADWP formed a Joint Powers Authority (JPA) with the city of Burbank to receive low interest financing for mandated and local water supply projects. This pass-through adjustment, which will appear as a line item on customer bills, will reduce the water revenue requirement by $45 million over five years, which represents a 2.9% savings on future rates.

The new Tier 1 allows using up to 8 HCF per month (16 HCF for a bi-monthly bill) and covers the cost for basic indoor water use, such as drinking, washing, and cooking. Tiers 2-4 reflect the higher cost of providing water to customers using more water and varies according to the lot size of a customer’s house, the temperature zone where they live (low, medium and high), and season (summer and winter). There is no longer an increase in allotment based on household size. Please click on the link below to learn more about your water rates.

LADWP is working to improve the customer experience by increasing the timeliness of bills, expediting response to customer calls, enhancing self-service options, and other measures. Additional revenues have been allocated in the proposed rate request to accomplish these goals. LADWP continues to work on programs that provide customers with water and energy saving rebates, technical assistance, incentives, and direct installation of water and electricity efficiency measures in their homes and businesses to better manage their use and save costs. Visit How to Save for more information.

The rate increases are necessary to keep up with the increasing costs to operate and maintain a reliable utility as well as to meet regulatory mandates. LADWP plans to accelerate the pace of replacing aging water and power infrastructure to improve reliability now and in the future. While the rates will increase on average overall, the rates use tiered prices charged according to a customers water and electric consumption. They have the effect of encouraging conservation so that customers who use less water and electricity may see their bill go down.

Historically, LADWP’s water and electricity rates have been among the lowest in the region when compared to neighboring utilities in Southern California, and the rates will remain competitive after the new rates take effect. The chart below illustrates how much money a typical residential customer in LADWP’s service area has saved compared to customers using the same amount of water and power in neighboring areas and other major cities in the state.

LADWP offers a variety of programs and incentives designed to help customers use less water and electricity and save on their utility bills. These programs include rebates and incentives for all customers—residential, small and large businesses, and industrial customers—to reduce their water and energy use. LADWP also has programs that offer free installation of efficiency upgrades for homes and small businesses that can help save electricity, water, and natural gas. More information about ways LADWP can help you conserve can be found at ladwp.com/save.

For qualified customers, LADWP will continue offering lower rates through the Low-Income Discount Program and Lifeline Program. Visit ladwp.com/lowincome to learn more.

From February 2011 to June 2014, LADWP implemented a multi-million dollar cost reduction plan to achieve a quick and measurable impact on LADWP’s expenses, and to help keep rates reasonable in light of industry-wide operational, regulatory and financial challenges.

As of June 2014, LADWP had saved an estimated $467 million, which exceeded the target by $8 million.

Additional cost savings going forward include:

The most significant cost savings comes from a new labor contract with LADWP’s largest employee bargaining unit, which will save $456 million over four years (ending in October 2016). This will represent a savings of $5 billion over 30 years.

Lower cost financing for water and power projects will save approximately $267 million.

From July 1 through December 2016, LADWP engaged in a major public outreach effort involving over 80 meetings and presentations on the rates proposals across Los Angeles. These included briefings for neighborhood councils, business groups and environmental groups. LADWP continues to welcome feedback on this website. People also had opportunities to comment online via this website, during two webinars, and we continue to welcome your feedback. You can also continue to connect with us on social media, including Facebook (/ladwp) and Twitter (@ladwp).

Yes, the Office of Public Accountability, staffed by the Ratepayer Advocate (OPA/RPA), has issued reports on both the water and power proposed rate ordinances. His reports are available for download on this website (myladwp.com/downloads), and on the OPA's website. LADWP's water and power final rate ordinances were revised based on input from the OPA/RPA as well as input from the Mayor, the Councilmember chairing the Energy & Environment Committee, business groups and other stakeholders. In response to the OPA/RPA recommendations, LADWP has incorporated accountability measures and check-in periods into the final rates ordinances.

In 2012, LADWP received approval from the Board of Water and Power Commissioners and the City Council for an increase in the water quality adjustment and a two-year power rate increase. The two-year power rate increase totaled 11%, or 1.41 cents/kWh and took effect in November 2012 and July 2013.

The power rate increase is necessary to expedite the pace of replacing aging infrastructure to ensure reliable power delivery to customers now and in the future. Additional revenues are necessary to continue the transition of LADWP’s power supply to comply with regulatory mandates. Over the next 10 years, LADWP will eliminate the use of coal power, expand renewable energy and energy efficiency, decrease greenhouse emissions, and repower the generating units at coastal power plants to eliminate use of ocean water cooling. Additionally, funds will be used to improve timely and accurate billing and customer service, expand online customer service options, and expand rebate programs to offset bill increases.

LADWP’s power system needs about $720 million additional revenue over the next five years to transition its power supply, comply with regulatory mandates, fund infrastructure reliability projects, and cover increased fuel costs. Failure to meet the regulatory mandates could result in significant fines for LADWP, which would in turn have adverse effects on rates.

The table and pie chart below show how the funds will be used. About 75% is necessary to meet mandates and transition the power supply to create a clean energy future for Los Angeles. The remainder will support the infrastructure reliability program and increased fuel costs.

5-Year Budgeted Costs

*Historical average is based on most recently competed fiscal years, 2012-13 and 2013-14.

**Supply transition and mandates includes coal transition, renewables and repowering coastal power plants.

The July 2014 water main break on Sunset Boulevard highlighted the need to accelerate the replacement and/or upgrade of LADWP’s vast array of infrastructure that is critical for reliably delivering high-quality water to Angelenos. With a significant amount of pipe installed at the turn of the century, LADWP faces a major challenge in keeping pace with the replacement and upgrade of these aging cast iron water mains and riveted-steel trunk lines. The water rate adjustment is also necessary to continue meeting stringent water quality regulations, and to continue expanding the local water supply to help reduce reliance on expensive purchased water. The need to expand L.A.’s local water supply has become more critical as drought conditions continue throughout the state.

LADWP has not increased basic water rates since July 2009 when a 3.1% water revenue adjustment went into effective. Subsequently, shortage year rates have been in place since June 1, 2009. In March 2012, LADWP received approval to raise the water quality adjustment factor from $0.50 to $0.80–a 35-cent adjustment on water rates.

Historically, LADWP’s water rates have been among the lowest in the region when compared to neighboring utilities and other water agencies in the state. The proposed residential single family water rates will continue to be competitive with other California water utilities.

Water rate comparison before and after LADWP proposed rate changes

*Based on available information for the water utilities listed for FY 2015-16 and FY 2016-17. Rates information not available for subsequent years for these utilities.

When LADWP’s water supplies are lower than normal, the Department must increase the amount of more expensive water purchased from the Metropolitan Water District (MWD). LADWP rates are designed so that MWD purchased water is covered by a pass-through factor on customer bills. In the past few years of the drought, the amount of MWD purchased water has been much higher than normal—averaging over 50% of L.A.’s water supply.

If drought conditions continue, a typical customer’s bill could increase more than estimated levels—from 2.7% to 2.9% annually, or an average of $3.75 to $4.02 on their monthly bill each year. A high-use customer’s bill could increase from a 5.6% annual increase during a normal year to 5.8% during a drought year. This represents a range of $16.58 to $17.17 more on their monthly bill over five years than at present rates.

Over the next five years, LADWP’s water system needs $330 million in additional revenue to fund infrastructure reliability projects, comply with water quality requirements and other regulatory mandates, and expand the local water supply. That said, however, LADWP rates are designed to encourage conservation, so those who use the least amount of water will see a lower increase on their bill. If the water supply levels improve, and there is less reliance on purchased MWD water, customers may see their bill decrease further.

Mayor Eric Garcetti issued an Executive Directive on October 14, 2014 to dramatically reduce the use of costly MWD purchased water while increasing water conservation and the use of recycled water. Key goals include:

Reduce water use per capita in the city by 20% by 2017

Reduce the purchase of imported water by 50% by 2024

The new water rate structure and rate changes have taken these policy goals into account by expanding the water use tiers, which will have the effect of encouraging conservation, and other adjustments needed to meet basic costs of operations. New revenues are also being allocated revenues to expand the local water supply. As stated above, customers will also see fluctuations in the purchased water pass-through depending on continued drought conditions.